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In my first educational series post I discussed how important it was to protect your assets ( "The Basics" - Protecting Your Assets ). Once you have your assets protected, the next step is develop a plan and set goals.

Each person's situation and goals will be different. It is important for you to sit down and decide for yourself what you would like to accomplish. Would you like to retire in 10 years or 30 years? Do you want to live off of $10,000 a month or $100,000 a month when you retire? Do you a have a family that you need to factor into the equation? Should you be spending more or saving more now?

Without goals, it's hard to make a plan. Once you have figured out for yourself what your goals are, the next part is to put a solid plan in place that will get you where you want to be.

Developing a plan first starts by dividing up your income into 3 groups: "now" money, "later" money, and retirement money.

Now money: This group consists of your living expenses, emergency savings, paying off consumer debt, and any "fun" money.

If you don't have a list of your monthly expenses, now is the time to write them down. You should know exactly how much your monthly expenses are. When you receive your check, pay yourself first. Set aside "x" amount of money to pay your monthly bills. This would be things like house note, car note, school loans, insurance, electricity, groceries, etc.

You should have an emergency fund set a side with enough money to pay your living expenses for 3 - 6 months. If you do not have this setup already, start building it a little each month right now from your "now" money.

Make a plan to pay off your consumer debt as quick as possible by paying "x" amount each month. This would be mainly credit cards.

Entertainment - You only live once right? Make sure to set a side a portion of your "now" money for you to spend on going out to dinner, buying toys, taking an occasional vacation, going to a sporting event, etc. What ever you do for fun or hobbies you may have.

For most people the biggest percentage of income will go to "now" money, but it is up to each individual to decide exactly how much needs to go to each part.

Later money: Later money consists of saving for big purchases that will happen in the next 5 - 20 years. The 3 biggest events will be purchasing your first home, getting married, and if you have kids, paying for their education. Of course, these events also vary from person to person. If you are already married, own your own home, and have no kids, you might want to save for an expensive sports car, boat, new business start-up, investment property purchase, etc. It's your plan, you decide what is important to you. The main point is that you save in advance for these purchases vs. taking out loans and pay interest for them (i will illustrate this point more below).

Starting an educational savings plan for your children is a great first step to compiling your "later" money. There are two main educational savings plans: the 529 Plan and the Coverdell Education Savings Account. Your situation and income will determine which plan would work best for you. The bottom line is that it would be much better for you financially to save for this ahead of time and make interest on your money vs making loans last minute and paying interest. Not to mention some of the plans may give you tax deductions, matching bonuses, and the money is not taxed when you take it out. If you have to write a check out of your checking account to pay for tuition you are paying for it with after tax dollars opposed to using one of these plans which will allow these funds to be used for education tax-free.

Generally speaking and depending on the time frame, if you save money in advance for a large purchase in the future you will only have to come out of pocket about 1/2 of the purchase price. This is because you will be making gains on the money you are saving. On the flip side, if you wait till the last minute and get a loan, by the time you finish paying for it years in the future you end up paying almost double the purchase price because of the interest you are paying. It is extremely important to get on the right side of interest. Compound interest is a great thing when working for you, but can be very detrimental to you financial when it is working against you in the form of interest from loans.

Retirement Money: In only a few situations can you take out retirement money before age 59 1/2 without getting hit with lots of penalties. Therefore, it is logical that age 60 is a good age to plan for retirement. If you do exceptionally well with other investments made from money allocated to your "later money" you may be able to retire before age 60. In this case your retirement is your "Plan B". What if those real-estate deals don't turn out well or your other investments failed. If you put enough money aside for your retirement then you would still be able to retire at age 60. If you do really well with other investments then your retirement savings will be extra, giving you more money to either spend on yourself, leave as an inheritance, or you could give it to a good cause.

How much money do you want to retire with and when you want to retire are two important factors you need to decide. The answers to those two questions will determine how much you need to save each month. Some factors to consider:

- Inflation: On average inflation rises about 3% a year. So what costs $1 now will cost about $2 in 30 years from now. If you are 30 years old, then you need to take this into account when determining how much money you will need for your retirement.

- Time: When you retire you will have a lot more time on your hands. Unless you plan on spending the majority of your time at home watching TV, then you need to make sure you saved enough money to allow yourself the ability to do more things. Right now most working people only have off on the weekends and holidays, which is when they play golf, go out to dinner and movies, etc. (spend money). When you retire every day is a weekend.

- Enjoy it: Who wants to retire poor, or with less money then they have now? You worked hard your whole life. Make sure you don't spend it all and you put enough towards your retirement so you can enjoy the later parts of your life. Travel. Do all of the things you always wanted to do but never had the time.

If you plan to retire making more money than you do now (which should be everyone's goal because you need to outpace inflation, you have more time to do things, and because you worked your whole life now it is time to reap the benefits of what you've worked so hard for) then you also need to take into account taxes and how they affect your plan. If given the option do you want to take the tax deduction now and pay later, or pay now and take it tax free later? Depending on your plan, how much you make now and how much you plan on retiring with will determine the best retirement strategy for you.

I hear people say " you only live once, enjoy it" or " you can die tomorrow". This is true, but what if you don't die young? What if you blew all of your money as fast as you could make it, saved none for retirement then your business failed? Then what? You have no source of income, you are old, and you have no retirement savings to live off of. You've pretty much screwed yourself and have left yourself with just a couple options. You can either continue working till the day you die or move in with your kids or family and have them take care of you.

The bottom line is that you have to have a plan and find a balance distributing the money you make now. It's ok to enjoy some of it now, but make sure you allocate enough to your retirement to enable you to accomplish your retirement goals, whatever those may be for you. As common sense as this may sound you would be surprised how many people never think twice about their retirement muchless do they take action. The first step is to devise a plan and come up with your goals. The next step is to talk to a good financial planner that can look at your whole picture and can set up for you the best ways to accomplish those goals.

Don't wait. Time is the one thing that you have on your side, but every day that you wait to start time is working against you. The longer you wait the more money you will need to put a side each month to accomplish the same retirement goals.

The information provided in this post is for informational purposes only. This information is not intended to be nor should it be viewed as legal advice. Although every effort is made to provide accurate and useful information, Unbiased Services, its owners and/or representatives assume no legal liability for the accuracy, completeness, or usefulness of the information provided here.

Good article, good read. I think another important point can be added to this - "you have to maintain a home for yourself to live in" AKA "don't lose your house". This is very important. You said 3 - 6 months emergency funds - this is good. If you don't have enough money to pay for a house, you'll be homeless. The most important thing in wealth management is to protect yourself from becoming homeless. You might also think about insurance against theft, fire, earthquake, etc. accident inside the house.

Now, you can live in a house even if you are in debt. The main thing is to have somewhere good enough to sleep every night. But, of course, the less debt you have the better.

Great resource, Will. Good post. Also great delineation of differing kinds of funds. Inflation is also factored in re savings vs investment.

I would guess 90% + of the people here, from the ones that make $500 a week to $50,000 a week have no assemblence of a plan, goals or budget, and most probably have nothing saved away for retirement. Something so easy to do and simple, for some reason most people just don't think about. I was one of those guys so I understand most people just don't know, don't care, or just never get around to it. But something so simple to do can have huge implications for you later in life (in a bad way) if you don't do it.

It is a good follow up to what I was posting about in this thread. All of you people who blow this stuff off now, you going to be kicking yourself in the ass in 20-30 years from now

Six ways to pursue your financial goals in the next decade and beyond

When asked to reveal the biggest issue that stands in the way of his clients’ financial success, a longtime financial adviser found it difficult to narrow it down to just one. Instead, he ticked off a list of common mistakes, ranging from short-term decision-making to trying to time the market to living beyond one’s means.
All these roadblocks, he noted, can be avoided with a common solution: Develop a realistic financial plan and stick to it.

It’s a familiar refrain to those of us who have taken the time to outline our longterm
goals and develop a basic strategy to achieve them, and yet still found ourselves
off track. A key problem is that many of us may lack the basic day-to-day skills needed
to neutralize some of the challenges that invariably arise.
As we enter a new decade, consider implementing some of the following strategies
into your financial plan. By doing so, we believe that you will have a better chance at achieving your financial goals over the next 10 years.

1. Understand where your money is going.
We all know that creating a budget plays a key part in ensuring financial health, no matter what your income. Yet it’s a step many of us don’t take, for reasons ranging from procrastination to denial. But ultimately there’s no substitute for getting a grasp on where your money is being spent. The good news: Getting started isn’t that hard. Advisers can often provide budgeting templates, and many free worksheets can be downloaded from the Internet. In addition, most personal finance software offers budgeting functionality. In terms of compiling data, strive for accuracy and thoroughness. One adviser asks her clients to track expenses for a handful of different months in order to capture less frequently incurred expenses such as quarterly insurance payments, taxes or holiday travel. Once you’ve developed a budget, consider the following steps for staying on track:

Revisit your costs at a set time each year. The best-run companies constantly re-examine how and where they spend their money. When they find opportunities to lower costs, they do. As individuals, however, we often let the perceived inconvenience of switching insurance providers or cell phone carriers stand in the way of reducing our expenses. But this cost-cutting approach to your personal finances can really pay off. As an initial goal, focus on reducing your expenses by 5% to 10%. Then, every year at an appointed time, revisit your budget with the aim of keeping it from rising. At a minimum, make it your objective to let your expenses rise at a rate slower than your income growth.

Increase your payment frequency. At one time or another (and that time may be right now) most of us have systematically chipped away at debt only to find ourselves back in the same position a few months or years down the road. Staving off debt is not a “one and done” event but an ongoing commitment requiring vigilance and systematic effort. If credit cards are your downfall, get rid of them. But if you’re unwilling to part with your plastic, limit it to a single card and be dogged about paying off your balance each month. To make doing so easier, one adviser suggests that rather than paying credit card bills monthly, do so each time you receive a paycheck. That way, the amount you owe at any one time becomes more manageable, and the temptation to carry a balance is reduced. The importance of keeping revolving debt in check cannot be overstated. According to one adviser, “In my experience, the aftereffects of accumulating significant revolving debt can set one’s finances back 10 years — five if they’re lucky.”

Make room for investing. The important “pay yourself first” dictum means that saving and investing should be part of an overall budgeting strategy, not simply afterthoughts to be considered once the bills are paid. Make saving and investing a “cost” on your budgeting worksheet.

In my first educational series post I discussed how important it was to protect your assets ( "The Basics" - Protecting Your Assets ). Once you have your assets protected, the next step is develop a plan and set goals.

Each person's situation and goals will be different. It is important for you to sit down and decide for yourself what you would like to accomplish. Would you like to retire in 10 years or 30 years? Do you want to live off of $10,000 a month or $100,000 a month when you retire? Do you a have a family that you need to factor into the equation? Should you be spending more or saving more now?

Without goals, it's hard to make a plan. Once you have figured out for yourself what your goals are, the next part is to put a solid plan in place that will get you where you want to be.

Developing a plan first starts by dividing up your income into 3 groups: "now" money, "later" money, and retirement money.

Now money: This group consists of your living expenses, emergency savings, paying off consumer debt, and any "fun" money.

If you don't have a list of your monthly expenses, now is the time to write them down. You should know exactly how much your monthly expenses are. When you receive your check, pay yourself first. Set aside "x" amount of money to pay your monthly bills. This would be things like house note, car note, school loans, insurance, electricity, groceries, etc.

You should have an emergency fund set a side with enough money to pay your living expenses for 3 - 6 months. If you do not have this setup already, start building it a little each month right now from your "now" money.

Make a plan to pay off your consumer debt as quick as possible by paying "x" amount each month. This would be mainly credit cards.

Entertainment - You only live once right? Make sure to set a side a portion of your "now" money for you to spend on going out to dinner, buying toys, taking an occasional vacation, going to a sporting event, etc. What ever you do for fun or hobbies you may have.

For most people the biggest percentage of income will go to "now" money, but it is up to each individual to decide exactly how much needs to go to each part.

Later money: Later money consists of saving for big purchases that will happen in the next 5 - 20 years. The 3 biggest events will be purchasing your first home, getting married, and if you have kids, paying for their education. Of course, these events also vary from person to person. If you are already married, own your own home, and have no kids, you might want to save for an expensive sports car, boat, new business start-up, investment property purchase, etc. It's your plan, you decide what is important to you. The main point is that you save in advance for these purchases vs. taking out loans and pay interest for them (i will illustrate this point more below).

Starting an educational savings plan for your children is a great first step to compiling your "later" money. There are two main educational savings plans: the 529 Plan and the Coverdell Education Savings Account. Your situation and income will determine which plan would work best for you. The bottom line is that it would be much better for you financially to save for this ahead of time and make interest on your money vs making loans last minute and paying interest. Not to mention some of the plans may give you tax deductions, matching bonuses, and the money is not taxed when you take it out. If you have to write a check out of your checking account to pay for tuition you are paying for it with after tax dollars opposed to using one of these plans which will allow these funds to be used for education tax-free.

Generally speaking and depending on the time frame, if you save money in advance for a large purchase in the future you will only have to come out of pocket about 1/2 of the purchase price. This is because you will be making gains on the money you are saving. On the flip side, if you wait till the last minute and get a loan, by the time you finish paying for it years in the future you end up paying almost double the purchase price because of the interest you are paying. It is extremely important to get on the right side of interest. Compound interest is a great thing when working for you, but can be very detrimental to you financial when it is working against you in the form of interest from loans.

Retirement Money: In only a few situations can you take out retirement money before age 59 1/2 without getting hit with lots of penalties. Therefore, it is logical that age 60 is a good age to plan for retirement. If you do exceptionally well with other investments made from money allocated to your "later money" you may be able to retire before age 60. In this case your retirement is your "Plan B". What if those real-estate deals don't turn out well or your other investments failed. If you put enough money aside for your retirement then you would still be able to retire at age 60. If you do really well with other investments then your retirement savings will be extra, giving you more money to either spend on yourself, leave as an inheritance, or you could give it to a good cause.

How much money do you want to retire with and when you want to retire are two important factors you need to decide. The answers to those two questions will determine how much you need to save each month. Some factors to consider:

- Inflation: On average inflation rises about 3% a year. So what costs $1 now will cost about $2 in 30 years from now. If you are 30 years old, then you need to take this into account when determining how much money you will need for your retirement.

- Time: When you retire you will have a lot more time on your hands. Unless you plan on spending the majority of your time at home watching TV, then you need to make sure you saved enough money to allow yourself the ability to do more things. Right now most working people only have off on the weekends and holidays, which is when they play golf, go out to dinner and movies, etc. (spend money). When you retire every day is a weekend.

- Enjoy it: Who wants to retire poor, or with less money then they have now? You worked hard your whole life. Make sure you don't spend it all and you put enough towards your retirement so you can enjoy the later parts of your life. Travel. Do all of the things you always wanted to do but never had the time.

If you plan to retire making more money than you do now (which should be everyone's goal because you need to outpace inflation, you have more time to do things, and because you worked your whole life now it is time to reap the benefits of what you've worked so hard for) then you also need to take into account taxes and how they affect your plan. If given the option do you want to take the tax deduction now and pay later, or pay now and take it tax free later? Depending on your plan, how much you make now and how much you plan on retiring with will determine the best retirement strategy for you.

I hear people say " you only live once, enjoy it" or " you can die tomorrow". This is true, but what if you don't die young? What if you blew all of your money as fast as you could make it, saved none for retirement then your business failed? Then what? You have no source of income, you are old, and you have no retirement savings to live off of. You've pretty much screwed yourself and have left yourself with just a couple options. You can either continue working till the day you die or move in with your kids or family and have them take care of you.

The bottom line is that you have to have a plan and find a balance distributing the money you make now. It's ok to enjoy some of it now, but make sure you allocate enough to your retirement to enable you to accomplish your retirement goals, whatever those may be for you. As common sense as this may sound you would be surprised how many people never think twice about their retirement muchless do they take action. The first step is to devise a plan and come up with your goals. The next step is to talk to a good financial planner that can look at your whole picture and can set up for you the best ways to accomplish those goals.

Don't wait. Time is the one thing that you have on your side, but every day that you wait to start time is working against you. The longer you wait the more money you will need to put a side each month to accomplish the same retirement goals.

The information provided in this post is for informational purposes only. This information is not intended to be nor should it be viewed as legal advice. Although every effort is made to provide accurate and useful information, Unbiased Services, its owners and/or representatives assume no legal liability for the accuracy, completeness, or usefulness of the information provided here.